Most Chinese Stocks Decline as CPI Increases to 16-Month High
March 11, 2010, 2:42 AM ESTMarch 11 (Bloomberg) -- Most Chinese stocks fell, led by automakers and developers, after inflation accelerated and new loans exceeded forecasts, boosting the prospect for higher interest rates.
SAIC Motor Corp., the country’s largest carmaker, lost 2.9 percent and Gemdale Corp. dropped 1.2 percent. Consumer prices climbed in February to a 16-month high and lenders extended 700.1 billion yuan ($103 billion), government reports showed today. Shanghai Pudong Development Bank Co. rose 2.7 percent after selling shares to China Mobile Ltd.
“The market’s reading of the economic data points to overheating and a lot of investors believe an interest-rate increase will come soon,” said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. in Shanghai.
More than two stocks fell for each one that rose on the Shanghai Composite Index, which gained 2.36, or 0.1 percent, to 3,051.28 at the close. The gauge has lost 6.9 percent this year on concern measures to curb property price gains and rein in lending growth will slow the economy. The CSI 300 Index slipped 0.1 percent to 3,276.71.
SAIC Motor slumped 2.9 percent to 20.51 yuan. FAW Car Co., which makes passenger cars in China with Volkswagen AG, dropped 3.3 percent to 22.53 yuan. Anhui Jianghuai Automobile Co., a unit of China’s biggest light-truck exporter, slid 4.7 percent to 10.71 yuan, the biggest decline since Dec. 17.
Inflation Targets
Premier Wen Jiabao aims to hold full-year inflation at around 3 percent after banks flooded the financial system with money to drive a rebound from the global recession. Inflation may climb to 5.5 percent by the end of the year, spurred by “rapid” wage increases nationwide and higher food prices, Credit Suisse AG said.
“Interest rates will have to rise” in the second half as inflation “surprises on the upside,” Dong Tao, a Hong Kong- based economist at Credit Suisse, wrote in a note to clients before the data was released.
Gemdale, the country’s fourth-largest developer by market value, lost 1.2 percent to 13.60 yuan. Separately, the company said its sales in January and February fell 52 percent from a year earlier. Shanghai Lujiazui Finance & Trade Zone Development Co. fell 2.1 percent to 23.31 yuan.
China’s 700 billion yuan of new loans extended in February exceeded the median estimate of 600 billion yuan. M2, a measure of money supply, rose 25.5 percent, compared with a 26 percent gain in January. The government targets 17 percent M2 growth for this year.
Industrial Output
Industrial production rose 20.7 percent in the first two months of 2010, the most in more than five years, according to the statistics bureau. Retail sales rose 17.9 percent in January and February, and urban fixed-asset investment gained 26.6 percent. Retail sales grew 22.1 percent in February, it said.
Economists often look at January and February numbers together to eliminate distortions caused by a one-week Lunar New Holiday. China’s 2010 data is also boosted by comparisons with year-ago levels depressed by the financial crisis.
The central bank hasn’t raised benchmark interest rates since December 2007, before the financial crisis deepened. The one-year lending rate is at 5.31 percent and deposit rate is at 2.25 percent. China has also effectively pegged the yuan at about 6.83 per dollar since July 2008 to help exporters.
Monetary Policy
The central bank has twice increased lenders’ reserve requirements this year. Deputy Governor Su Ning said this week that those moves were to prevent monetary conditions becoming “excessively loose” as the government continues to implement what it describes as a “moderately loose” stance.
Data released yesterday showed exports climbed more than estimates in February and property prices rose at the fastest pace in 23 cities.
Pudong Bank gained 2.7 percent to 21.30 yuan. China Mobile said it agreed to buy 20 percent of the bank for 39.8 billion yuan to expand its electronic-payment business.
Wuhan Double Co. led gains for companies based in the central Chinese city after the nation’s cabinet approved an urban development plan.
Wuhan Double, a property developer, surged by the 10 percent daily limit to 12.42 yuan. Wuhan Sanzhen Industry Holding Co., a water company, gained 1.6 percent to 8.98 yuan.
High-technology industries will be promoted and transportation facilities in the city improved under the plan, according to a statement posted on the government’s Web site yesterday.
The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.
Jinxi Axle Co. (600495 CH) dropped 1.7 percent to 19.61 yuan after saying net income slumped 59 percent in 2009 from a year earlier.
TCL Corp. (000100 CH), China’s biggest publicly traded consumer-electronics maker, lost 1.5 percent to 5.39 yuan after saying 2009 net income fell 6.2 percent to 470 million yuan.
Yunnan Aluminium Co. (000807 CH), China’s fifth-largest producer of the light metal, retreated 2 percent to 12.31 yuan after the company said 2009 net income fell 34 percent to 46 million yuan as sales declined 15 percent.
--Zhang Shidong. Editors: Richard Frost, Allen Wan
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net
